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Basic rules for a systematic approach

 

Equities

Entries:

  1.  New 52 week high., (Prefer new all time high)
  2. Stock in uptrend
  3. In consolidation period prior to buy. 3a. On recent gap up: Completed backtest with bullish engulfing candle
  4. Limit buy order on prior day closing price.
  5. Risk/Reward maximum 10% Upward rising 50DMA and 150DMA. ( Avoid buying on recent multiple 50DMA penetrations, unless there are significant rebounds on back tests during weak market action.

Trade Management:

  • On Breakout. Raise stops to new pivot low closing price, below 50DMA
  • On Weakness. ATR below 50DMA or 20 day break of Donchian channel below 50 DMA.

Exit:

  1. Break of 50 DMA more than twice in a short time period and stop loss penetration.
  2. Break of 50 DMA, on volume with EOD close to LOD and stop loss penetration.

Market Management Stop. (Execute prior to closing) Any loss or move greater than 5%:

  • 2 days in a row.
  • Negative News with volume significantly  greater than normal.
  • On move greater than ATR.
  • (Differentiate between flash crash or market participants fleeing by no recovery at EOD from LOD.
  • Take note of a gap down below 20 DMA seems like a correlation of it breaking the 50 and triggering exit signal in 10 or so sessions?)
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